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Mortgages and death

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Jul 20, 2022

What happens to a mortgage when you die?

Although it can be hard to imagine the death of a mortgage borrower, it is something that happens. Many people are left to deal with the financial burden of paying for an outstanding mortgage debt on their own.

The monthly mortgage payments do not die when a mortgage holder passes away. Before any savings can be passed to the family members or other beneficiaries named in the will, the executor must pay it out of the estate.

If the mortgage is joint, one spouse will inherit the other person’s share, although this can lead to complications.

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What types of mortgages will be affected by the death or incapacity of borrowers?

The type of mortgage you have, along with any other mortgage loan, can impact how the property is passed on to the next generation.

A joint mortgage and the death of one of the parties

“What happens to my mortgage when my partner dies?”

If there is a joint mortgage, and one of the partners dies, the surviving partner will inherit their share of the property. This assumes that the couple were joint tenants at the time. If one of the joint mortgage holders dies, the remaining outstanding mortgage payments would be due to the surviving homeowner. In this case, the homeowner would have to pay the entire outstanding debt if mortgage life insurance is not in place.

Our guide provides more information on mortgages following the death of a spouse.

Common mortgages for tenants and death

If one of the tenants with a common mortgage dies, the share will be passed to their heirs via a will and not to the tenants who are still living.

It is, therefore, crucial to making a will. Without one, all property would be divided according to the rules. You might end up with a share of the property that you don’t want.

Sole mortgage

A sole mortgage can only be taken out in one person’s name. They are responsible for the monthly payments. If the homeowner dies and has named a beneficiary, the property and any mortgage debt will be inherited by them. The lender can still claim their money back if no beneficiary is named. This can be done by selling the property.

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Can you transfer your mortgage to the UK after your death?

Many homeowners designate a friend or family member as the sole beneficiary of an estate through a will. This will allow the family member to inherit the property and any mortgage debt.

You might want to sell a property with an outstanding mortgage if you inherit it. This will allow you to pay off any mortgage debts the deceased borrower left behind. You may be able to keep the property and remortgage so that the repayments are more affordable.

The decedent homeowner might also have other debts. An “executor”, who may be the executor, may use assets (which could include the property) to pay these debts.

Do you need to make a will for the death of a mortgagee?

A will is a legal document that clarifies who gets your estate and who pays the mortgage if you die with a mortgage. A will is a way to ensure your loved one’s safety and leave home.

Who pays the mortgage debt if you die?

You may be the reverse mortgage holder if the mortgage holder dies. This means that you could inherit the mortgage debt. Many people may be left with mortgage debt from a spouse, parent, or loved one. This can cause financial problems and stress.

Sometimes, a life insurance policy or form of mortgage death insurance could cover the mortgage. This could leave the beneficiary or anyone remaining on the mortgage with unaffordable debt.

A mortgage lender will recommend that enough life insurance be in place to protect the mortgage in case of death.

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What happens if the mortgage is not paid after a death?

You may wonder what your options are if you inherit a property that was financed by a mortgage from someone who died. These options include:

  • Ask the mortgage lender to grant you a payment vacation
  • To lower the monthly cost, you can increase the term extension on the mortgage
  • Modifying the mortgage from a repayment mortgage into interest only
  • To reduce your monthly payments, you can remortgage to find a lender that has a lower interest rate.
  • Downsizing and selling to make your property more affordable
  • Cash from insurance/employer death in service benefits to pay a portion of the mortgage

What happens if you cannot make your monthly mortgage payments after your death?

If you cannot pay your mortgage on time or become behind, the house may be taken away to repay the homeowner’s debt.

Talking to an advisor can help you compare the various options and determine the most cost-effective based on your situation. Get advice from a specialist.

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After a mortgage borrower’s passing, can I remortgage the property?

You may decide to remortgage if you want a lower interest rate to make your inherited mortgage payments affordable. Your existing lender is the best option. They should be more flexible.

If the lender cannot assist (for example, they may not accept credit issues or other financial problems), There may be other options.

  • Your ability to afford the mortgage – they might use a mortgage calculator to help you determine if you can pay it alone.
  • They may also look at your salary. A few lenders also offer mortgages based on commission and bonus income.
  • They will ask if you are self-employed, how long and if your income is reliable. This may be done by asking for your books.
  • All benefits, pensions, and insurance payouts you are eligible for or plan to receive shortly.

Is it possible to remortgage your house after death even if you have bad credit?

Yes, it is possible to remortgage if you have bad credit and inherit a house. Lenders may take into account:

  • The debt’s severity
  • The date that the issue was officially registered
  • When the debt is paid in full
  • The reason for the credit issue

If you have poor credit, finding a lender may be harder, and the interest rates are not as favourable. It is a good idea to consult a bad credit mortgage expert to find lenders more likely to approve you. For more information, please contact us.

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Do you need mortgage death insurance?

It is highly recommended that you regularly review your insurance policies whenever you take out any debt. This will ensure that the mortgage and any related living expenses are covered after their death.

What are the various types of death mortgage insurance available?

Life Insurance (Death Mortgage Protection Insurance):

This insurance pays the mortgage off in the event of your death. To ensure that your policy covers all types of death, including accidental death due to mortgage insurance, it is important to read and understand the terms.

Critical Illness Insurance

If you or a family member is diagnosed with a serious illness then your insurance should pay out in this instance.

Income Protection Insurance

Income protection insurance provides income protection if you become disabled or sick. You can use the payments however you like. You can use the payments to pay bills or other expenses.

Payment protection insurance:

Payment protection is insurance that covers the mortgage payment costs in the event of you becoming disabled, sick, or unemployed. In the event of the death of a spouse, the mortgage payment would still be paid. The mortgage lender receives the insurance payment.

How much does mortgage death insurance cost?

Many insurance companies offer different policies and terms, making it difficult to compare mortgage death insurance costs. It is a good idea to consult an advisor to find the best rates for mortgage death insurance based on your needs. For assistance, please contact us

You should consult an expert on how to transfer mortgages after death

Our brokers are qualified advisors who have extensive knowledge of mortgages after death. They will provide confidential, impartial advice and help you find the best solution for you.

We take pride in offering 5-star service and access to expert advisors.

  • Brokers of all market segments
  • OMA Accredited
  • LIBF Training course qualified
  • This is a situation where we are very familiar with the needs of our customers.

Talk to an expert about how to transfer mortgages after a UK death

Call today if you have any questions or to make an enquiry.

Contact us today and let us find the broker who is best suited for your situation. There is no charge and absolutely no obligation to improve your credit rating.

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